What is real estate?

What Is Real Estate?

Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made, including water, trees, minerals, buildings, homes, fences, and bridges. A real estate is a form of real property. It differs from personal property, which are things not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.

The term “real” in real estate refers to ownership rights over something that exists on earth; it does not refer to its monetary value. For example, if you own an acre of land, you have legal title to that piece of land. You can sell your interest in this land for money, but you still retain legal title until you transfer the deed showing who owns what portion of the land. 

Physical Characteristics of Real Estate

The land has three physical characteristics that differentiate it from other assets in the economy:

Immobility. While some parts of the land are removable and the topography can be altered, the geographic location of any parcel of land can never be changed.

Indestructibility. The land is durable and indestructible (permanent).

Uniqueness. No two parcels of land can be exactly the same. Even though they may share similarities, every parcel differs geographically.

Types of Real Estate

There are five main types of real estate:

Residential real estate: Any property used for residential purposes. Examples include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences with fewer than five individual units.

Commercial real estate: Any property used exclusively for business purposes, such as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking facilities, aesthetic clinics for procedures like gastric sleeve surgery in Tijuana, restaurants, shopping centers, dental clinics to perform procedures like dental implants Tijuana, stores, and theaters.

Industrial real estate: Any property used for manufacturing, production, distribution, storage, and research and development. Examples include factories, power plants, and warehouses.

Land: Includes undeveloped property, vacant land, and agricultural land (farms, orchards, ranches, and timberland).

Special purpose: Property used by the public, such as cemeteries, government buildings, libraries, parks, places of worship, and schools.

How the Real Estate Industry Works

Despite the magnitude and complexity of the real estate market, many people tend to think the industry consists merely of brokers and salespeople. However, millions of people in fact earn a living through real estate, not only in sales but also in appraisals, property management, financing, construction, development, counseling, education, and several other fields.

Many professionals and businesses including accountants, architects, banks, title insurance companies, surveyors, and lawyers also depend on the real estate industry.

Real estate is a critical driver of economic growth in the U.S. In fact, housing starts the number of new residential construction projects in any given month released by the U.S. Census Bureau is a key economic indicator. The report includes building permits, housing starts, and housing completions data, divided into three different categories:

Single-family homes

Homes with 2-4 units

Multifamily buildings with five or more units, such as apartment complexes

Investors and analysts keep a close eye on housing starts because the numbers can provide a general sense of economic direction. Moreover, the types of new housing starts can give clues about how the economy is developing.